Gyms restore muscle, movement where retail giants have fallen

Monday

PROVIDENCE — As shopping center owners see weakness among their retail tenants, many are turning to fitness gyms to beef up their portfolios, experts on the local commercial real estate market say.

As big-box stores close, many of them are being replaced by gyms, according to two Boston-based spokesmen for CoStar Group, a commercial real estate data firm headquartered in Washington, D.C.

In fact, CoStar market analyst Peter Conway said, gyms lead all other new tenants in leasing closed big-box stores.

"A lot of these bigger centers are trying to orient themselves away from pure shopping," Conway tells The Providence Journal.

His colleague, Mark Hickey, a CoStar market economist, says the reason is simple and increasingly familiar: pressure from online commerce, where shoppers can buy clothing, books and an ever-expanding universe of other merchandise without leaving their homes.

Conway says that online shopping has had an outsize effect on a particular segment of retail: "What we've seen across the country, the most vulnerable stores are the larger format — the big-box stores."

Statistics bear that out.

In 2007, 36% of square footage leased at shopping centers was for apparel stores, while only 13% was leased to health and fitness businesses, according to Hickey and Conway.

Now, that gap has narrowed substantially: 28% for apparel and 20% for health and fitness, they say.

The leading fitness center chain leasing former big-box stores, according to Conway, is Planet Fitness.

"We're coming along at just the right time as the big boxes are closing down," says Steve Eddleston, co-owner of Planet Fitness's RISMA franchise group, which has 20 gyms in Rhode Island and Southeastern Massachusetts.

Just as the retail landscape is shifting, so is that of the gym business and how commercial landlords view gyms, according to Eddleston.

"Gyms were places people avoided, where they were judged," says Eddleston. Where gyms once were dens where the already fit went to spend hours working on their bodies, fitness chains now appeal to average people who have become more aware of the need to care for their bodies. "Our focus is the 80% of Americans who have never joined a gym."

That has been good for business, according to Eddleston. "I'm rewriting leases for another 10 years because my business is growing. I'm not seeing it slow down," he says. "It's hard for a lot of those big box guys to sign 10-year leases now."

As more people tune into fitness, gyms become a more valuable asset for commercial landlords, says Eddleston.

"We actually bring traffic to the mall," he says.

Not too long ago, shopping centers had clauses in their rental agreements banning gyms, says Eddleston.

"They thought we were just taking up parking spaces," he says. "Now, we have landlords calling us, trying to get us into these places."

Gyms are not only good for shopping centers, says Eddleston, but shopping centers are good for gyms.

"We can't go into a place where we're parking restricted," he says, noting that shopping centers have plentiful parking.

And, he adds, gyms tend to be busiest on Mondays, Tuesdays and Wednesdays from 4:30 p.m. to about 7:30 p.m. — when shopping centers are quietest. "We become a complementary tenant," he says. "We just fit nicely into the retail model because we complement the shopping world."

Also, shopping centers are rarely tucked in out-of-the-way, hard-to-find places, he says. "They are typically located strategically in markets where people can come and go."

And shopping centers have the security and infrastructure — including well lit parking lots — that gym users prefer. "You're in a venue where you can be open 24 hours a day," says Eddleston.

It seems a perfect match.

"Landlords see us as a good thing. We're not just taking up parking spaces for hours and hours," says Eddleston. "We bring back health to the area. We bring traffic. It's a virtuous circle."

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